Tuesday, August 28, 2012

The Morning Call--Get ready to strap yourself in


The Market
Technical


Yesterday, the indices (DJIA 13124, S&P 1410) meandered in a narrow range and finished down slightly. They closed within both primary trends: (1) their short term trading ranges [12022-13302, 1266-1422---clearly at the top of that range] and (2) their intermediate term uptrends [12252-17252, 1288-1868].

Volume continues to be quite low; breadth was down. The VIX rose, leaving it between the (my newly re-marked) lower boundary of its intermediate term trading range and the upper boundary of the short term downtrend.

GLD fell, closing right on the upper boundary of its short term downtrend and above the lower boundary of its intermediate term trading range.
http://www.minyanville.com/sectors/precious-metals/articles/GDX-SIL-GDXJ-255EHUI-precious-metals/8/27/2012/id/43513


Bottom line: the Averages continue to hover right below the upper boundaries of their short term trading ranges; and I continue to believe that this level will hold any challenge. As a result, my focus remains on the Sell side, carefully watching those stocks near their Sell Half Ranges or trading highs.

Another move to the upside by GLD will prompt an additional purchase of shares.

Post war stock market rallies (short):
http://www.ritholtz.com/blog/2012/08/post-war-stock-market-rallies/

This market look toppy (medium):
http://www.comstockfunds.com/%28X%281%29S%28ovfe5255l5dbt4mqm1ijm03v%29%29/default.aspx?act=Newsletter.aspx&category=MarketCommentary&newsletterid=1668&menugroup=Home&AspxAutoDetectCookieSupport=1

Tuesday morning chartology (medium):
http://advisorperspectives.com/dshort/guest/Dominic-Cimino-120827-Divergent-Signals.php

Update on ‘the best stock market indicator ever’:
http://advisorperspectives.com/dshort/guest/John-Carlucci-Best-Indicator-Ever-Update.php

Fundamental

Headlines


We got only one minor economic datapoint yesterday---the Chicago Fed manufacturing index which was down. Nothing significant. In fact, this week will be pretty dull when it comes to economic stats.

On the other hand, there will still be plenty of attention getting news:

(1) the GOP political convention [zzzzzzzzzzzz],

(2) soon to be hurricane Isaac [on top of the problems in Venezuela]: the shutdown and potential damage to a portion of our offshore gulf energy production which while temporary, can still drive oil and gasoline prices higher, adding an additional burden to consumer spending,

(3) Bernanke’s Jackson Hole speech: the question is, is more easing coming? My problem if it is: I think that [a] investor’s will care less this time than before and [b] the impact on the economy of this easing will be negative not positive.

Has the damage from QEIII already started (short):
http://pragcap.com/has-the-damage-from-qe3-already-begun

The Fed is apparently not a house united---this from the Dallas Fed:
http://www.zerohedge.com/news/flashing-warning-unintended-consequences-ultra-easy-monetary-policy-fed

In the meantime, Draghi just announced that he wouldn’t be at Jackson Hole. Too much work, not enough vacation time..........or perhaps, he has nothing to say.
http://www.zerohedge.com/news/draghi-miss-jackson-hole-forum-all-rumors-now-focus-ecb-september-6-meeting

Despite Draghi’s new plan, Spanish banks continue to lose deposits (medium):
http://www.zerohedge.com/news/spains-economic-collapse-results-whopping-5-deposit-outflow-july

Plus Catalonia is in revolt (short):
http://www.zerohedge.com/news/spains-catalonia-region-demands-%E2%82%AC5-billion-bailout-warns-will-not-tolerate-conditions


(4) the food fight [which started last weekend] in Europe over Draghi’s new plan. I have no idea whether or not this escalates; and even if it does, the eurocrats have an admirable history of dodging disaster at the last minute and keeping the ‘muddle through’ scenario in tact. But that does nothing to reduce my fear that at some point the math simply overwhelms bureaucratic temerity and hope.

The practical effects of Bundesbank president Weidmann’s comments (medium):
http://www.marketwatch.com/story/internal-discord-leaves-ecbs-threats-toothless-2012-08-27

Merkel on Greece and Weidmann (medium):
http://www.reuters.com/article/2012/08/26/us-eurozone-idUSBRE87P0AI20120826

An overview of the EU (medium):
http://www.zerohedge.com/news/tempest-has-left-teapot

And this---France and Germany make nicey, nice (medium):
http://www.ft.com/cms/s/0/97ad4a7a-f05e-11e1-b7b2-00144feabdc0.html#axzz24q3WnaV3

(5) and there is plenty more to come---September calendar of events with analysis from SocGen (medium):
http://www.zerohedge.com/news/september-knocking-here-annotated-european-event-calendar

Bottom line: there is plenty of potentially headline grabbing events this week though I am not sure they will be Market moving---unless Merkel makes it perfectly clear that Germany will not go along with Draghi’s version of Operation Twist or the Ber-nank suddenly gets religion or Isaac proves more destructive than now anticipated. Plus with half of Wall Street leaving early for the Labor Day weekend, I am not sure what kind of pin action we would get, even if one of the above occurred. In any case, there is nothing that persuades me to Buy stocks.



Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.